1. The Art and Science of Decision-Making May 13, 2013 Robert S. Duboff Tony Gallo Jason Robins

2. 1 Themes All decisions have an emotional component; most have a rational component as well o The process can be structured, scientific o Making the actual decision is always art – science can be used, but you can’t turn off type 1 thinking All big decisions are influenced by biases, prior events, priming and the like Some decisions are about puzzles; some are about mysteries o Recognizing which is which is critical Decision-making will and should vary depending on context (and whether it is a group decision or not o Risk o Consequences o Etc.

3. 2 Decision Situations Individual Family Large business Small business Start-ups Government Non-profit Before Decision DeliberationDecision Post- Decision

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5. 4 A Good Decision Is: Meeting objective(s) Objective Based on hypothesis generation Replicable Valid With no interaction effect (i.e., “scientist is not part of the experiment”) Complete diagnosis/considered everything One that would be reaffirmed if did it over One that feels right One you are better off after it One with clear cut thinking

6. 5 What Causes Mistakes in Decisions? Resistance to answer changing Anchoring/simplification errors Overconfidence/above average Change/inattentional blindness Framing Highsight bias/memory Information overload Skimming Wrong causes Problems

7. 6 Decision-Making Problems Are Abundant Priming Anchoring Availability WYSIATI Cognitive dissonance Self-delusion/over-confidence Perceptions/personality types differ Etc.

8. 7 A Rational Decision-Making Process Define the problem Identify the criteria Weight the criteria Generate alternatives (can use decision tree/Bayes) Conduct research/information gathering where relevant and influential Rate each alternative on each criterion Compute the optimal decision Options Delineate roles Set timing Source: Judgment in Managerial Decision-Making, Max Bazerman.

9. 8 Ways to Improve Decisions Triage first if the issue is a mystery or a puzzle o Is “why” important or only “what”? Acknowledge instincts at the onset o Identify what could change/overcome the instincts o Then, structure research to try to disprove Form teams to advocate live options Articulate the goals of the decision Use a decision tree/Bayes o Add instincts perhaps o Add “what would I have to believe” Do a pre-mortem to identify what could go wrong and a pre- celebration Try out explanations in advance Develop checklists as appropriate Consult with people (including experts) appropriate for the issue o Consider those with fresh perspective/truly objective o Must be credible to decision-maker(s)

10. 9 Ways to Improve Decisions (continued) Identify (possible) linkages to other events Consider how to handle sunk costs, if any, and decide if zero-based decision-making makes sense Root cause investigation Use skills of Ss and Ns; Ts and Fs Pause (especially Js) Train to make decisions better Platonian dialogue o Question beliefs and habits

11. 10 Quotes “If you can measure it, it can also be measured incorrectly.” - Samuel Arbesman “Statistics are no substitute for judgment.” - Henry Clay “Once you have missed the first button hole, you’ll never manage to button up.” - Goethe “ ‘Facts’ may not always be facts, but feelings will always be feelings.”